The U.S. Securities and Exchange Commission (SEC) has just announced a lawsuit against Kik Interactive Inc. for holding a $100M initial coin offering (ICO) for its Kin token without registering.
The case is the largest ever filed against a company’s ICO and illustrates that the SEC is extending its crackdown with a high-profile case.
Kik raised some $100M in its 2017 ICO, $55M of which came from American investors. The digital token, called ‘Kin,’ was sold without any of the mandatory disclosures.
In a court filing made on Tuesday, the regulator is seeking monetary penalties which are yet to be disclosed.
According to Steven Peikin, co-head of the SEC’s division which handles enforcement and lawsuits, “companies do not face a binary choice between innovation and compliance.” He also stressed that the Kin token falls under securities law.
Kik Fights Back
Kik is not backing down from the SEC without a fight. Recently, the team launched a crowdfunding site called DefendCrypto.org, which has been raising money to stage a counter-suit against the SEC. So far, Kik has said it raised some $4.8M to resist the SEC’s actions. The regulator’s actions “set a dangerous precedent and stifle innovation,” the company said in a public comment.
According to the lawsuit, however, the SEC paints a different picture.
Kin: A Shameless Cash Grab?
The government agency claims that, in late 2016 and early 2017, Kik messenger was becoming a flop. Nobody was using the messenger and the company was simply running out of cash to run its operations.
The ICO was invented in 2017 to make up for these losses and to make it seem like the company was solvent. According to the SEC, the Kin ICO was merely a cash grab.
Currently, Kin is trading at around one-third of the price since it first started trading.
Some are hoping that the results of this high-profile lawsuit may finally clarify questions regarding the legal status of tokens and whether they are de facto always securities.
Do you believe Kik will lose this lawsuit against the SEC? Let us know your thoughts below.